New lockdown regulations encourage arbitration or mediation for the resolution of disputes against the State or organs of State

The Level 4 Lockdown Regulations published by the government on 29 April 2020 encourage the use of alternative dispute resolution for the resolution of disputes with the State or organs of State, in particular mediation or arbitration. This may be welcoming to potential litigants against the State or organs of State, as mediation or arbitration may result in a more efficient and effective resolution of potential disputes.

6 May 2020 3 min read Dispute Resolution Alert Article

The relevant provision reads as follows:

Resolution of disputes

  1. (1) The parties to a civil dispute against the State or any organ of State, which may potentially result in litigation, may –

(a)     either before or after the commencement of litigation but before the granting of judgement by the court, agree to refer the dispute to mediation; or

(b)     before the commencement of litigation, agree to refer the dispute to arbitration.

(2) Where the parties agree to mediation or arbitration:

(a)     the Office of the Solicitor General shall assist the parties in coordinating and overseeing the process; and

(b)     the parties may agree that a judge who has retired from active service shall act as the mediator or arbitrator as the case may be, in which event no fees shall be payable to such mediator or arbitrator.

(3) The Office of the State Attorney in whose area of jurisdiction a dispute arises shall immediately upon knowledge of such dispute engage the party raising the dispute, or such party’s legal representative, in considering mediation or arbitration.

Based on the above Regulation it is apparent that the intended purpose is to ensure that disputes involving the State or organs of State are disposed of efficiently and in a cost-effective manner as opposed to protracted litigation in courts. Parties to the dispute are at liberty to elect whether they wish to proceed by way of mediation or arbitration at any stage before or after the commencement of litigation but before the granting of judgment by the court.

Some practical considerations in respect of arbitration to consider:

  • Since arbitration is consensual in nature, can Regulation 13(1)(b) be viewed as an offer by the South African government to the parties involved in disputes with the State or organs of State to refer such disputes to arbitration?
  • If Regulation 13(1)(b) is such an offer, would it then merely be for the disputing party “accepting” the State’s offer set-out in Regulation 13(1)(b) by writing back to the relevant organ of State and the Office of the State Attorney?
  • Could one potentially argue that by virtue of this provision, the State has agreed to arbitrate both commercial and investment disputes? The phrase “civil disputes” is used – which implies private parties in a dispute with the State. If so, the State may have inadvertently opened the door to investors being able to accept the offer to initiate any dispute against the government by means of arbitration.
  • Save for South African parties, foreign parties that may want to proceed with arbitration against the State or organs of State may not want to appoint retired judges as arbitrators. Further, the retired judges that accept the mandate as arbitrator will not be paid by either party. Although that is beneficial to the parties, it raises doubts of whether there will be any retired judges that would be willing to act as arbitrator without being compensated.

It is encouraging to see the South African government’s support for mediation and/or arbitration for the resolution of disputes with the State. Parties should take advantage of the government’s offer, flowing from the Lockdown Regulations, to amicably resolve any disputes or any other civil disputes against the State or organs of State.

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